The discount to NAV offered on UK Smaller companies’ trusts moved from around 14% to 5% during the year, according to research from QuotedData. This, said the investment trust research company, arguably reflects a gradually improving outlook for the UK economy.
Those numbers are backed up by Miton UK Microcap Trust, which proposed the issue of up to 250 million new ordinary and/or C shares in aggregate through a share issuance programme over the next 12 months on Tuesday.
“With world growth stalling there is a renewed interest in assets that can generate ongoing growth with the prospect of attractive dividends in the coming three to five years,” said Gervais Williams, fund manager of Miton UK Microcap. “The smallest quoted stocks often have the greatest vibrancy and despite the unsettled markets our investment strategy continues to identify new holdings with attractive risk/reward ratios.”
“Investors seeking a different investment proposition in a group of assets that are less correlated with markets are indicating they have an interest in supporting the C Share issue,” added Williams.
Looking at the investment trust sector more broadly over the year, smaller companies dominated across the board.
The top performing sectors in price terms over 2015, in order were: European Smaller Companies, UK Smaller Companies, Japan, Japan Smaller Companies and Europe, according to QuotedData. European Smaller Companies, Japanese Smaller Companies and UK Smaller Companies also recorded the second, third and fourth largest re-ratings in 2015, pipped at the post only by European property trusts.
“The support that central bankers are providing to some economies has helped performance of domestic (primarily smaller) companies in those markets,” said James Carthew, QuotedData research director. “Over the very short-term, the median discount for European trusts has widened but Draghi’s statements earlier this month could help sentiment recover when markets stabilise,” he added.
Carthew continued: “Shifting ratings can throw up interesting opportunities from time to time but we would stress the importance of investing over the longer-term and focusing on fundamentals, rather than reacting to short-term volatility.”
